On Monday, Circuit City Stores Inc. - the second-largest electronics retailer, which filed for Chapter 11 protection last month – received the final approval for $1.1 billion debtor-in-possession financing to continue its operations.

The financing approved by US Bankruptcy Court, which would replace the retailer’s $1.3-billion asset-backed loan, would enable the company to pay for the goods and services received from vendors and business partners. In addition, the new loan will also be used to pay employees and stock merchandise.

Kevin Huennekens, US Bankruptcy Judge, also approved a motion allowing Circuit City to invalidate employment and severance contracts with 40 former employees - including Philip Schoonover, the chairman and chief executive who stepped down in September.

Circuit City lawyer Gregg M. Galardi told the bankruptcy court that the Richmond-based company is closing 155 out of its 722 US stores.
Galardi said that after the Chapter 11 filing, same-store sales fell 43-50 percent at stores not scheduled for closing.

Further, in a statement, spokesman Bill Cimino, said though since its operation under Chapter 11 reorganization protection, same-store sales had dropped much more steeply than original forecast, this should not be considered a negative.

Cimino said: “We are improving our gross margin rate and that is helping to offset the sales number as well as helping us manage to our debtor-in-possession budget”, and added “our biggest sales opportunities for the holidays still lay ahead of us.”